Dynamic aid allocation
Year: 2014
Type: article
Abstract: This paper introduces a framework for studying the optimal dynamic allocation of foreign aid among multiple recipients. We pose the problem as one of weighted global welfare maximization. A donor in the North chooses an optimal path for international transfers, anticipating that consumption and investment decisions will be made by optimizing households in the South, and accounting for limits in the extent to which recipients can effectively absorb aid. We present quantitative results on optimal aid policy by applying our approach to a neoclassical growth model, where the scope for aid-funded growth is determined by the recipients' distance from steady-state.
Institutions: Overseas Development Institute, University of Bristol, Institute for Fiscal Studies, IZA - Institute of Labor Economics, Institut d'Etudes Politiques de Paris, Centre de Recherche en Économie et Statistique, Centre for Economic Policy Research, Institut National de la Recherche Agronomique, Paris Jourdan Sciences Economiques, Département d'économie de Sciences Po, University College London, Paris School of Economics
Language: English
Subfield: Development
Field: Social Sciences
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $1,418
OpenAlex ID: W2117229551